Amazon to open Woodland Hills "traditional" grocery

[klkla]

so I stopped at the Gelson's across the street. I was one of only three shoppers in what's a very large store; of course, I saw the prices and suddenly remembered why I didn't shop there and left. I do ponder if Gelson's sold some of its leases to Amazon. Their legacy stores seem to do well, but newer stores don't, which isn't unsurprising since their product isn't much different than Ralph's / Albertson's-Vons ... but prices are much, much higher.

Considering Amazon owns Whole Foods and there is a lot of animosity between the two chains I doubt they would want to sell any of their leases to them.

The only real problem stores that Gelson's has are some of the ones that were acquired in the Haggen bankruptcy and a newly constructed store in Rancho Mission Viejo (because the neighborhood is all new construction and hasn't been fully built out yet).

The Irvine store is only 30,000 sq. ft. but might appear to be larger. It's never been a high volume store but has been steady over the years. It's about 20 years old, so not exactly a new store.

The product mix is very different than Ralph's / Albertson's-Vons. The service deli is way better. They have chefs in the store making the product instead of a clerk that simply pours heavily processed foods in bowls or a deep fryer like the other chains. The produce is way better. The meat is way better. And they carry a lot of specialty items in almost every category that you won't find at other stores.

As far as their pricing on common items goes (like Tide or Coke) you have to consider their business model. The prime Gelson's customer is someone who is very successful in life and doesn't need to worry about whether they pay $5.99 or $4.99 for a box of Tide. They demand the best quality and they demand good service. Gelson's cashiers still unload the customer's carts, they schedule their stocking crews in the afternoon and evening when the store is busiest so that they have ample back up cashiers and people in the aisles to help customers find items. The stores schedule janitors throughout the day to keep the stores pristine. All of this extra service costs money and they pass those costs on to the customer.

Those 3 Gelson's shoppers are likely to generate the same amount of gross profit as 20 Ralphs shoppers. Different business models. Different key demographics for their customers.

[Bagels]

Considering Amazon owns Whole Foods and there is a lot of animosity between the two chains I doubt they would want to sell any of their leases to them.

The only real problem stores that Gelson's has are some of the ones that were acquired in the Haggen bankruptcy and a newly constructed store in Rancho Mission Viejo (because the neighborhood is all new construction and hasn't been fully built out yet).

The Irvine store is only 30,000 sq. ft. but might appear to be larger. It's never been a high volume store but has been steady over the years. It's about 20 years old, so not exactly a new store.

The product mix is very different than Ralph's / Albertson's-Vons. The service deli is way better. They have chefs in the store making the product instead of a clerk that simply pours heavily processed foods in bowls or a deep fryer like the other chains. The produce is way better. The meat is way better. And they carry a lot of specialty items in almost every category that you won't find at other stores.

As far as their pricing on common items goes (like Tide or Coke) you have to consider their business model. The prime Gelson's customer is someone who is very successful in life and doesn't need to worry about whether they pay $5.99 or $4.99 for a box of Tide. They demand the best quality and they demand good service. Gelson's cashiers still unload the customer's carts, they schedule their stocking crews in the afternoon and evening when the store is busiest so that they have ample back up cashiers and people in the aisles to help customers find items. The stores schedule janitors throughout the day to keep the stores pristine. All of this extra service costs money and they pass those costs on to the customer.

Those 3 Gelson's shoppers are likely to generate the same amount of gross profit as 20 Ralphs shoppers. Different business models. Different key demographics for their customers.

For clarification, I should've used the phrase "relatively new," referencing the chains' aggressive expansion -- more than tripling its store count -- within the past two decades, after keeping just a handful of stores its first half-century in operation. Most of these "new" markets don't generate near the volume that of its original core stores, and I was pondering if Gelson would be interested in selling them to Amazon. You bring up an excellent point that Gelson might be hesitant to sell these leases to a competitor, but if the chain's willing to relegate itself to a handful of stores in core markets -- which have very limited opportunities for competitors to expand/gain market share -- it wouldn't be as big of a concern. That's especially true as online grocery shopping is expected to swell this decade, with the most likely participants having high discretionary incomes.

Heck, the entire Gelson's chain might be an attractive takeover target by Amazon. Gelson's business model is largely obsoleted - similar stores around the country have either transitioned toward a pure specialty market (including Bristol Farms locally) or went out of business. Most of Gelson's products overlap with traditional supermarkets, and it's not just a $1 markup. Yes, their deli, bakery and assortment of gourmet/specialty products outshines Ralph's, but most people realize they're paying double for that frozen entree, or triple for that lettuce heart. Ultimately, as the older "old money" generation passes on, I just can't see them staying afloat.

It's also worth mentioning that in the late 1990s/early 2000s, Safeway sold a handful of Vons to independent operators (e.g. Superior), rather than closing the stores and liquidating everything inside it, including furniture and fixtures (which makes it more costly to re-open the store).

[veteran+]

so I stopped at the Gelson's across the street. I was one of only three shoppers in what's a very large store; of course, I saw the prices and suddenly remembered why I didn't shop there and left. I do ponder if Gelson's sold some of its leases to Amazon. Their legacy stores seem to do well, but newer stores don't, which isn't unsurprising since their product isn't much different than Ralph's / Albertson's-Vons ... but prices are much, much higher.

Considering Amazon owns Whole Foods and there is a lot of animosity between the two chains I doubt they would want to sell any of their leases to them.

The only real problem stores that Gelson's has are some of the ones that were acquired in the Haggen bankruptcy and a newly constructed store in Rancho Mission Viejo (because the neighborhood is all new construction and hasn't been fully built out yet).

The Irvine store is only 30,000 sq. ft. but might appear to be larger. It's never been a high volume store but has been steady over the years. It's about 20 years old, so not exactly a new store.

The product mix is very different than Ralph's / Albertson's-Vons. The service deli is way better. They have chefs in the store making the product instead of a clerk that simply pours heavily processed foods in bowls or a deep fryer like the other chains. The produce is way better. The meat is way better. And they carry a lot of specialty items in almost every category that you won't find at other stores.

As far as their pricing on common items goes (like Tide or Coke) you have to consider their business model. The prime Gelson's customer is someone who is very successful in life and doesn't need to worry about whether they pay $5.99 or $4.99 for a box of Tide. They demand the best quality and they demand good service. Gelson's cashiers still unload the customer's carts, they schedule their stocking crews in the afternoon and evening when the store is busiest so that they have ample back up cashiers and people in the aisles to help customers find items. The stores schedule janitors throughout the day to keep the stores pristine. All of this extra service costs money and they pass those costs on to the customer.

Those 3 Gelson's shoppers are likely to generate the same amount of gross profit as 20 Ralphs shoppers. Different business models. Different key demographics for their customers.

Well said and spot on!

I have shopped at many Gelson's (both original and acquired). Below were my observations:

1. Usually GREAT customer service in all departments, which is their MAIN claim to fame (this has been on the decline for years, unfortunately).

2. Gourmet (mostly Euro and American) foods not found in traditional grocers.

3. Almost always uber clean and polished stores even way back when most of their stores were old and worn.

But, it was never the place to find the flavors and sizes and variety and prices that most other customers need regarding everyday mainstream merchandise.

There is scant organic products and few "natural" products. Remember, Gourmet food is not necessarily healthful food

I was concerned about the VERY large stores they acquired. I was thinking what are they going to do with all that extra space. More gourmet foods from China? Mexico? Africa? Caribbean? I did not see that. I also did not see significant increase in merchandise variety that better mirrors Albertsons (pre merger, they were known in California for variety that surpassed their competition).

How about special departments other than the full service norms? With all that space I found the answer to be NO. Gelsons took over a few of the stores I managed (55,000 sqft and bigger) and they really did nothing with all that extra space.

I think Amazon might want to look at some of these stores and offer to take it off out of Gelsons hands because, as kikla pointed out that Gelsons has a "Different business models. Different key demographics for their customers." and these large stores to fit their business format.

[storewanderer]

I think Gelson's is caught in a perception challenge. Many customers do not seem to fully understand the difference between gourmet foods and "Organic" foods. So you have a store like Whole Foods which is really a sort of blended version but strongly emphasizes the "Organic" message (despite so many of its products not even being Organic), and many customers seem to equate Gourmet Food and Organic Food as being the same thing.

My observation of Gelson's center store branded grocery pricing is they are not priced higher on an everyday basis than Ralphs or Vons. The issue is a total lack of sale/promotions. Also there isn't much private label which further makes the pricing worse because the "lowest cost" option at Gelsons is what would be the "middle cost" option at Ralphs or Vons. Not saying Gelsons should get into the business of heavily selling private label items (it would be a turn off to their customers and waste of space) but the lack of them in many categories is part of their pricing situation.

Pricing in fresh categories in Gelsons is pretty outrageous and outside deli and meat I am not really sure the extra cost is worth what they are charging for bakery and produce.

Still, it is nice to see a chain like Gelsons that runs its stores to a high standard. High standards for store appearance, high standards for employee appearance and how the employees treat customers, high standards for the quality of the fresh products they bring into the stores. So many chains have let their standards fall over the past decade with a variety of excuses (Amazon, labor shortage, high cost of doing business in whatever region, etc.).

I wonder if Amazon would just buy Gelsons outright? Who is owning Gelsons now? Isn't it private equity owned? Also hadn't they sold off some real estate recently?

[veteran+]

I think Gelson's is caught in a perception challenge. Many customers do not seem to fully understand the difference between gourmet foods and "Organic" foods. So you have a store like Whole Foods which is really a sort of blended version but strongly emphasizes the "Organic" message (despite so many of its products not even being Organic), and many customers seem to equate Gourmet Food and Organic Food as being the same thing.

My observation of Gelson's center store branded grocery pricing is they are not priced higher on an everyday basis than Ralphs or Vons. The issue is a total lack of sale/promotions. Also there isn't much private label which further makes the pricing worse because the "lowest cost" option at Gelsons is what would be the "middle cost" option at Ralphs or Vons. Not saying Gelsons should get into the business of heavily selling private label items (it would be a turn off to their customers and waste of space) but the lack of them in many categories is part of their pricing situation.

Pricing in fresh categories in Gelsons is pretty outrageous and outside deli and meat I am not really sure the extra cost is worth what they are charging for bakery and produce.

Still, it is nice to see a chain like Gelsons that runs its stores to a high standard. High standards for store appearance, high standards for employee appearance and how the employees treat customers, high standards for the quality of the fresh products they bring into the stores. So many chains have let their standards fall over the past decade with a variety of excuses (Amazon, labor shortage, high cost of doing business in whatever region, etc.).

I wonder if Amazon would just buy Gelsons outright? Who is owning Gelsons now? Isn't it private equity owned? Also hadn't they sold off some real estate recently?

And don't forget variety in center store! Really subpar!

Take a look at their spread of Ocean Spray juices at the expense of so many other brands that would fit nicely with their image. And I still think their regular prices in center store for mainstay products is higher than Ralphs but maybe on par with Vons-Albertsons-Pavillions.

Regarding Organics............spot on! I think Vons and Ralphs actually have MORE lines than Whole Foods. And yes, it is interesting to note some consumers' ignorance regarding organic and gourmet. I think the reason is twofold. Company messaging (advertising, etc.) and consumer ignorance (< I'm being polite).

I mean seriously, despite accurate or inaccurate promoting by companies you have to be quite "..........." to confuse the two but it is happening for sure.

Arden Group is the parent and TPG Capital is the owner!

Side note: I don't think anyone carried more organics than Fresh & Easy and their presence for about 8 years did nothing to educate consumers.........apparently.

[submariner]

Please remember this topic is about Amazon's new grocery initiative. Discussions about Gelson's should be in their own topic. Thanks!

[Bagels]

Several Gelsons locations are similar to those the WSJ reported Amazon as having secured leases for. With private equity owning Gelsons, I do ponder if they'd rather sell these leases (to Amazon) than invest in the stores, which is why I brought the chain up. Obviously a good sidebar discussion for another thread .